IEA: Surge in global coal production threatens climate crisis

New report argues that without drastic policy action coal will rival oil as dominant energy source by 2017

Businessgreen.com, Dec. 19, 2012

Without urgent action to deliver a high carbon price or bring on line new unconventional gas reserves, coal is on track to displace oil as the global economy's dominant energy source, resulting in potentially catastrophic consequences for efforts to curb carbon emissions.

That is the stark warning presented this week by a new report from the International Energy Agency (IEA), which argues that despite a surge in investment in renewable energy and the emergence of new shale gas reserves in the US, coal still accounted for nearly half of new energy investment in recent years.

"Thanks to abundant supplies and insatiable demand for power from emerging markets, coal met nearly half of the rise in global energy demand during the first decade of the 21st century," said IEA executive director, Maria van der Hoeven, in a statement.

"This report sees that trend continuing. In fact, the world will burn around 1.2 billion more tonnes of coal per year by 2017 compared to today – equivalent to the current coal consumption of Russia and the United States combined. Coal's share of the global energy mix continues to grow each year, and, if no changes are made to current policies, coal will catch oil within a decade."

The report predicts that despite the adoption of emission reduction targets in a host of countries, coal consumption will increase in every region over the next five years, barring the US where coal is being displaced by new shale gas reserves.

Shale gas has been touted as a means of curbing emissions in the US as it emits significantly lower levels of greenhouse gases than the coal it displaces. But the IEA acknowledges that the boom in shale gas development in the US has simply allowed the country to export more coal to Europe, "where low CO2 prices and high gas prices are increasing the competitiveness of coal in the power generation system".

The IEA report suggests US coal exports to Europe are close to peaking and coal demand by 2017 in Europe is likely to drop to levels only slightly above those in 2011, due to increasing renewable generation and decommissioning of old coal plants across the EU.

But it also suggests Europe and other countries should consider emulating US investment in shale gas. "The US experience suggests that a more efficient gas market, marked by flexible pricing and fuelled by indigenous unconventional resources that are produced sustainably, can reduce coal use, CO2 emissions and consumers' electricity bills, without harming energy security," said van der Hoeven. "Europe, China and other regions should take note."

The comments are likely to anger green groups that maintain that higher population densities in Europe will make it difficult to extract high levels of shale gas and also argue that a transition to gas will not on its own deliver sufficient reductions in greenhouse gas emissions to tackle climate change.

The IEA admits the projections for coal demand are "troubling", noting that even if the Chinese economy slow down demand for coal would continue to rise over the next five years.

Such an increase in consumption of carbon-intensive coal would make it all but impossible for the world to meet stated emission reduction goals, particularly given that carbon capture and storage (CCS) technologies remain a long way from large-scale deployment.

"CCS technologies are not taking off as once expected, which means CO2 emissions will keep growing substantially," said van der Hoeven. "Without progress in CCS, and if other countries cannot replicate the US experience and reduce coal demand, coal faces the risk of a potential climate policy backlash."